A year ago, people were busy criticizing the social networking giant for its inability to generate mobile revenues. Now they know how Facebook is doing in mobile advertising.
Facebook Inc (FB - Get Report) shares have more than doubled this year so far, thanks to better than expected mobile monetization. Over the past year, the social networking giant has come up with a number of ways to monetize its more than 1.1 billion user base, including the latest video ads. The company is expected to boost its revenue by 60% to $7.5 billion. The real question facing a Facebook Inc (FB - Get Report) investor is whether the company has the opportunity to grow rapidly in coming years.
A new take on Facebook
Nathan Brooks of Seeking Alpha says that growth of Facebook Inc (FB - Get Report) is likely to stall in 2015, and the company won’t be worth more than $30 billion in the best case scenario. His argument is that everything new attracts people, especially in the advertising industry. Once the initial craze wears out, things begin to change or deteriorate. For example, when the first banner ad appeared, it had a whopping click-through rate of 44%. Now marketers are happy with 0.1% CTR.
Nathan says that the U.S. and European markets are almost saturated, with more than 332 million daily active users. Today, most of the user growth is coming from developing countries. There are 397 million daily active users in developing countries. Despite that, about 70% of Facebook Inc (FB - Get Report)’s revenue come from the U.S. and Europe. So, says Nathan, even if there is a rapid growth in the user base in developing nations, revenues won’t improve at a similar pace.Furthermore, as users shift to mobile, Snapchat, WhatsApp, BBM WeChat are challenging Facebook Inc (FB - Get Report) in the mobile space. What Nathan doesn’t talk about is that Facebook Inc (FB - Get Report) has become an integral part of people’s lives. The company has data of more than 1.1 billion people. Facebook Inc (FB - Get Report) simply needs to come up with ways to monetize those users without annoying them too much.